repco foundation for micro credit repco foundation for micro credit formal & informal linkages...

Repco Foundation for Micro CreditRepco Foundation for Micro CreditRepco Foundation for Micro CreditRepco Foundation for Micro Credit

www.repcohome.comwww.repcohome.comwww.repcofoundation.comwww.repcofoundation.com

REPCO FOUNDATION FOR MICRO CREDIT

FORMAL & INFORMAL LINKAGES IN INDIAN

HOUSING SECTOR

Presentation by

G. Manickasundaram

Project Director



GROWTH OF THE INDIAN HOUSING SECTOR – IMPACT

Engine of domestic growth Backward & forward linkages with over 269

ancillary industries Second largest employment generator in the country Growth in demand is driven by

• improved affordability • Lower interest rate • Fiscal incentives • Stable property prices • Rising income levels• Increasing housing needs



Formal• Banks• Financial Institutions • Capital Market• Cooperatives • NBFCs

Informal• Non institutional • Private sources

• Money lenders • Traders • Relatives & Friends • NGOs • SHGs

FORMAL AND INFORMAL LINKAGES



SOURCES FOR FINANCE FOR HOUSE CONSTRUCTION

Own

Friends/ relative

s

Cooperative

Govt. Private financi

al

Private non-

financial

Money lenders

Construction type

New Building

64.8 9.3 3.2 9.0 1.9 0.6 8.8

Addition to floor space

70.0 7.3 3.1 6.5 0.5 0.1 10.1

Maintenance / repair

71.0 8.0 3.3 4.4 0.4 0.4 10.1

By structure type

Pucca 65.3 9.2 3.1 8.4 2.0 0.4 9.3

Semi pucca

67.3 8.3 1.6 8.0 0.4 0.9 11.3

Kutcha 70.3 8.2 0.6 2.3 0.2 0.3 15.2

(% of monetary cost on construction)

Source: NSSO (2004)



THE REPCO GROUP

Headed by Repco Bank- a multi-state Cooperative Sector Institution co- promoted by GOI and Southern States of Tamil Nadu, Andhra Pradesh, Karnataka & Kerala. Head quartered in Chennai, it started operation in 1969 with the main objective

of rehabilitating repatriates. The Bank is governed by the Ministry of Home Affairs, Govt. of India.

Repco Home Finance Limited (RHFL), a housing finance subsidiary of Repco Bank started its operation in May 2000 and currently having a housing loan portfolio of Rs.1200 crore with 35 branches across Southern India.

Repco Foundation for Micro credit (RFMC), an NGO promoted by Repco Bank was registered, under Companies Act 1956 (Section 25). It is a not for profit entity for extending supporting services to SHGs financed by the bank solely with a

view to increasing the income level and eventually improving the standard of life of the target group.

Repco Infrastructure Development Company Limited (RIDCL), subsidiary of Repco Bank & RHFL came into being in July

2008 with the main objective of implementing PPP projects with Southern State Governments.

28-10-2009

5



Low Income Housing- Repco Experience

Areas of concernAreas of concern Reasons Reasons 1) Non–Availability of Property title1) Non–Availability of Property title Many own possession rights but not

ownerships.

2) Non–Availability of Income proof2) Non–Availability of Income proof •Unorganized laborers, seasonal nature of income .•Applicants working in their own farm.

3) Non–Availability of House 3) Non–Availability of House estimates / expenditure budgetestimates / expenditure budget

Civil Engineers / Contractors are present rarely.

28-10-2009

6



Low Income Housing- Repco Experience…

Areas of concernAreas of concern Reasons Reasons 4) Repayment Schedule generation4) Repayment Schedule generation With seasonal nature of income and

non-regularity, projecting continuous income stream is difficult

5) Delay in House Construction5) Delay in House Construction Unavailability of Building materials like bricks.

6) Minimum margin contribution 6) Minimum margin contribution There is initial delay in contributing the margin.

7) Abandoning of House 7) Abandoning of House Construction in the middle Construction in the middle

As it is not an income generating activity in most of the cases , they abandon it mid-way

8) High cost of Administration 8) High cost of Administration Low ticket size and more frequent need of interaction owing to lack of awareness

28-10-2009

7



Areas of concernAreas of concern Reasons Reasons 9) Need for revising the legal frame 9) Need for revising the legal frame workwork

(eg) Lands with Tribals / allotted to eligible beneficiaries under slum clearance schemes

10) Coordination with Govt. 10) Coordination with Govt. Departments for infrastructure Departments for infrastructure developmentdevelopment

Roads, Electricity, Water, Schools and Transportation

11) Improving the Quality of income 11) Improving the Quality of income of target groupof target group

All eligible members of the family to be optimally employed.

Low Income Housing- Repco Experience…



Low Income Housing- Proposed REPCO Model

Based on our experience so far in dealing with housing for low income, unorganized sector households, the most striking revelation is that owing to traditionally non-income generating nature of investment for housing (for this strata particularly where rental/ speculation is not relevant) there is lack of motivation on part of the beneficiaries.

It is felt that the solution lies in promoting a Group Housing Concept through SHG Group Housing Concept through SHG

ModeMode.

Hence, REPCO evolved an integrated model for shelter cum income generation for these households through the parent Bank and its 3 subsidiaries-RHFL, RFMC & RIDCL. The core principle of the model would be somewhat similar to NHB’s PHIRA Scheme with executing agencies taking bigger and more active role in implementation.

With group guarantee, even without adequate collateral, mortgage could be created and repayment guaranteed thereby addressing the problems of non-availability of property title and income proof.

28-10-2009

9



Low Income Housing- Proposed REPCO Model

Working of the ModelWorking of the Model

Organizing SHGs involved in similar

activity

Promoting SHGs

Vocational Training

Marketing of SHG Products

Income could be assessed based on the prevailing market rates of SHG products and sales volume

There would also be credit linkages.

Follow up and recovery at lower cost

Activity Role Effectiveness

Construction of Shelter cum work

shed

Assessing the shelter area requirement and work area requirement

Providing technical support

Planning the layout Construction & delivery

Preparing estimates / expenditure budget, avoiding

delay in construction or abandoning construction ,

providing technology support, low cost housing

Financial Assistance

Providing funding Arranging for

refinancing from concerned institutions

Taking care of initial margin requirement through family labour and locally available

materials of beneficiary

28-10-2009

10



BENEFITS OF THE SCHEME

Provides shelter to the poor downtrodden.

Gives opportunity for the unorganized labourers to own houses.

To benefit Women Self Help Group members to renovate their houses.

Shelter loan improves sustainability and the relationship among their members.

repco foundation for micro credit repco foundation for micro credit formal & informal linkages...

Documents

repco foundation

repco group

subsidiary of repco

micro credit rfmc

housing needs slide

income levels

southern india

seasonal nature of income